Compliance March 22, 2016

PBGC Issues Final Rules About Annual Reporting

The final rules modify waivers and information requirements to better balance the burden of reporting with PBGC’s need for information.
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The Pension Benefit Guaranty Corporation (PBGC) is amending its regulation on Annual Financial and Actuarial Information Reporting under the Employee Retirement Income Security Act (ERISA) section 4010 to codify provisions of the Moving Ahead for Progress in the 21st Century Act (MAP-21), the Highway Transportation and Funding Act of 2014 (HATFA) and the Bipartisan Budget Act of 2015.

The final rule modifies the reporting waiver under the current regulation tied to aggregate plan underfunding of $15 million or less to be based on non-stabilized interest rates. The agency explained in its proposed rule that the current regulation does not allow it to access important available information about plans that present substantial risk and exposure to the pension insurance system. The agency is not receiving data in 4010 filings that it would otherwise receive because plans that were never intended to qualify for a regulatory waiver are, in fact, qualifying as a result of MAP-21 and HATFA funding relief.

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In addition, the final rule adds new reporting waivers for smaller plans and for plans that must file solely on the basis of either a statutory lien resulting from missed contributions more than $1 million or outstanding minimum funding waivers exceeding the same amount (provided the missed contributions or applications for minimum funding waivers were previously reported to the PBGC). 

The final rule also provides alternative methods of compliance for reporting certain actuarial information and makes a few technical changes to the regulation.

Text of the final rule is here.

Data & Research March 22, 2016

Providers of TDF Products Limited

More than three of every five dollars invested in a target-date mutual fund or CIT is controlled by one of only three financial services firms, research found.
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Sway Research’s first in-depth study of the target-date fund (TDF) space based on detailed analysis of more than 120 mutual fund and collective investment trust (CIT)-based target-date series finds these funds had nearly $1.1 trillion in assets at the end of 2015.

Nearly 90% of the assets in target-date mutual funds and CITs are controlled by products that invest only in the proprietary funds of the series sponsor. The research also found more than four in five TDF dollars are invested in a series that features a “through” retirement glide path, though the term “through” is very much subjective, as more than half of these assets are in products that realize their equity landing point (the point at which they reach their lowest equity allocation) within 15 years of reaching the target date.

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Although there is a wide range of options for tactical glide path deviation, almost all of the assets are held in products with a range of 10% or less.

The study reveals that as of the end of 2015, more than three of every five dollars invested in a target-date mutual fund or CIT is controlled by one of only three financial services firms—Vanguard, Fidelity, and T. Rowe Price. Not coincidentally, each of these firms also possesses a defined contribution (DC) recordkeeping business. Vanguard is the most dominant TDF player, managing nearly one-third of the $1.1 trillion of TDF assets within its proprietary offerings.

Only a handful of asset managers that lack a DC recordkeeping business or branded product have achieved a substantial share of TDF assets. BlackRock is the only firm among the top-10 in market share that does not have a DC product or platform.

The report lays out the competitive landscape and opportunities within the TDF space, while also providing insights into the product design features that have generated the most market share. Information about how to order the report is at http://www.swayresearch.com/research/.

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